Euro Opens the Week Under Pressure
The euro began the week on weaker footing, falling 0.31% as investors moved toward the US dollar amid rising tensions in the Middle East. The EUR/USD pair traded at 1.1379 after reaching an earlier high of 1.1445, reflecting a shift toward caution across currency markets.
Risk Aversion Supports the Greenback
The main force behind the decline in EUR/USD was renewed strength in the US dollar. As geopolitical risks intensified and oil prices climbed, traders sought safety in the Greenback, putting pressure on the shared currency.
Oil Shock Revives Rate Hike Concerns
Higher crude prices have also revived concerns that inflation could remain elevated. Rising energy costs can fuel expectations that major central banks, including the Federal Reserve, may need to keep policy tighter or even raise interest rates further.
Fed Comments Add to Dollar Momentum
Federal Reserve Governor Christopher Waller reinforced that cautious market mood. He said a high core inflation reading would prompt immediate consideration of a rate hike, although he also noted that inflation could still return to the 2% target without additional increases in rates.
Labour Market Near Fed Objective
Waller also said the labour market is closer to the Federal Reserve’s maximum employment objective. His remarks kept attention firmly on incoming inflation data and strengthened the perception that the Fed remains prepared to respond if price pressures accelerate again.
Treasury Yields Move Higher
US Treasury yields rose after the comments and amid broader inflation concerns. The yield on the 10-year Treasury note climbed 6 basis points to 4.624%, suggesting investors are preparing for the possibility of tighter Federal Reserve policy.
Dollar Index Advances
The US Dollar Index, which tracks the dollar against six major currencies, rose 0.32% to 101.28. Money markets are pricing in nearly 42 basis points of Federal Reserve tightening, according to Prime Terminal data.
Middle East Escalation Adds Pressure
Fresh reports from the region added to the cautious tone. US CENTCOM said at 16:45 ET that it had begun a third consecutive night of strikes against Iran. Iranian media reported explosions in Bandar Abbas and said Iran’s army had targeted US military facilities in Kuwait and a “hostile” US vessel with cruise missiles.
Key US Data Ahead
The US economic calendar will become more important in the coming days, with crucial inflation data due for release. Traders will also watch testimony from Federal Reserve Chair Kevin Warsh before the US Congress, which could offer new guidance on the central bank’s policy outlook.
Lagarde Speech in Focus for Europe
In the Eurozone, attention will turn to remarks from European Central Bank President Christine Lagarde. Her comments may help shape expectations around the ECB’s policy stance at a time when the euro is being pressured by dollar strength and external risk factors.
Technical Picture Remains Bearish
EUR/USD is trading around 1.1385 and maintains a bearish short-term bias. The pair remains below the clustered 50-day, 100-day and 200-day simple moving averages near 1.1554, while price action continues inside a downward parallel channel.
RSI Signals Ongoing Downside Pressure
The Relative Strength Index is near 37, keeping momentum in bearish territory. This suggests that sellers still have the advantage as long as the pair remains capped by the channel structure and the previously broken descending trend line near 1.1600.
Resistance Levels to Watch
Initial resistance is located near 1.1422, where the lower boundary of the current downward channel now sits above spot price. Beyond that, the grouped daily moving averages around 1.1554 form a stronger resistance area.
Broader Upside Barriers
Further resistance appears near the upper boundary of the channel at 1.1596 and around the prior trend-line break area at 1.1600. Together, these levels create a dense barrier before the horizontal resistance at 1.1849.
Downside Risk Remains Open
With no clearly defined support immediately below current levels, EUR/USD remains vulnerable to further weakness if selling pressure resumes. For now, the pair is being driven by a combination of dollar strength, rising Treasury yields, geopolitical risk and uncertainty around the next steps from the Federal Reserve.
